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Strategic deployment planning is key to maintaining a competitive edge and ensuring your supply chain operates at peak efficiency. Skipping strategic deployment planning can lead to increased costs, poor customer service, and inefficiencies in your supply chain. Here’s why you should prioritize it:
1. Cost reduction
Sitting inventory costs money. By strategically allocating stock to the right distribution centres, you can avoid slow-moving and obsolete inventory, reducing storage costs and waste. Imagine having a warehouse full of products that no one needs—it’s like burning money!
2. Improved customer service
Organized deployment ensures that inventory is available at the right time and place, improving your On Time In Full (OTIF) KPI. This leads to better customer satisfaction and stronger supplier relationships. Happy customers mean repeat business and positive word-of-mouth.
3. Enhanced Supply Chain efficiency
A well-planned deployment process reduces the frequency of urgent orders, freeing up cash flow and allowing you to focus on improving sales forecasts. Less chaos means more time to innovate and grow your business.
Mastering Deployment Planning with SAP IBP
Deployment planning is a crucial process in supply chain management, and SAP Integrated Business Planning (IBP) for Response & Supply offers robust tools to streamline this. By efficiently distributing available supply across your network, deployment planning can significantly enhance your supply chain’s performance.
Deployment planning ensures that existing supply meets demand without the need for creating new orders. SAP IBP underscores its importance by providing a dedicated planning run profile and algorithm for deployment. This algorithm focuses on utilizing current supply elements to satisfy demand, making the process both efficient and effective.
In the diagram below, inventory deployment planning plays a key role within the IBP processes. Deployment is an output of daily changes within the supply and allocations S&OE processes. The output of deployment can then be further used in the Transportation Load Building process where transportation loads are optimised based on the deployment requisitions.
Tailoring your strategy
SAP IBP offers flexibility with two deployment planning algorithms: finite heuristic and optimizer.
- Heuristic algorithm: Ideal for simpler supply networks, this algorithm uses order data and prioritization rules to create a straightforward, priority-driven supply plan.
- Optimizer algorithm: Suitable for more complex networks, this algorithm aggregates order data to daily periods and calculates a cost-optimized supply plan, considering various constraints and cost rules.
Choosing between these algorithms depends on your network’s complexity and your strategic priorities. A heuristic approach is easier to understand and implement, while an optimizer approach can provide a more cost-effective solution.
Tactical Planning Approaches and Parameters
1. Available to deploy profile
- Defines which order types stock transfers must be pegged to, ensuring proper deployment requisitions.
- Can use a single general profile or multiple profiles for different transport stages (e.g., from factory to regional distribution centres and from regional DCs to local DCs).
- Determines whether stock transfer requisitions propagate their available-to-deploy status through the network.
2. Switchable constraints
- Allows selective activation or deactivation of constraints for different planning phases (e.g., constraints on early planning, relaxed in later phases).
- Supports exploratory analysis by enabling constraint toggling based on predefined rules.
- Key switchable constraints:
- Supplier Constraints: Limits supplier delivery volumes per period.
- Capacity Constraints: Regulates production/transportation volumes based on available resource limits.
- Allocations: Ensures supply is distributed strategically among multiple customers.
- Maximum Receipts/Requirements: Limits order sizes for better stock management.
- Lot Sizes: Defines minimum, maximum, and rounding values for orders.<
- Planning Start: Sets the “now” point in planning, preventing early order creation.
- Freeze Horizons: Locks supply plans for short-term stability, coordinating with execution systems.
3. General parameters
- Horizons: Defines freeze horizon durations (calendar days, working days, weeks, or months) to align with operational systems (e.g., SAP IBP and S/4HANA).
- Source of Supply Priority Limits: Excludes low-priority sources to improve efficiency.
- Substitution Priority Limits: Restricts substitution scenarios for better control over discontinuations, mutual substitution, and promotional substitutions.
- Push Excess Stock (Finite Heuristic): Moves excess stock beyond a predefined threshold using stock transfer requisitions, useful for non-stock locations (e.g., seaports setup as a location).
4. Planning with subnetworks
- Segments the supply chain network into smaller planning units (e.g., upstream/downstrea, regional planning).
- Ensures localized planning strategies for different parts of the network.
5. Planning with quotas
- Applies quota-based supply sourcing to balance demand fulfillment.
- Optimizer: Minimizes costs by adhering to quota distributions.
- Heuristic: Prioritizes improving quota balance while ensuring demand fulfillment.
Heuristic-based tactical decisions
1. Demand prioritization rules
- Establishes a hierarchy of demand fulfillment based on customer, location, or product attributes.
- Determines pegging strategy: Just-in-Time Supply (delays fulfillment) vs. Stable Supply (ensures early allocation).
2. Demand fair share segments
- Ensures equitable distribution of supply across different customer segments.
- Prioritization set based on customer region or other attributes.
Optimizer-based tactical decisions
1. Optimizer costs & settings
- Uses cost-based optimization to guide deployment strategies.
- Key cost considerations:
- Inventory Holding Costs: Penalizes excess stock.
- Transportation Costs: Prioritizes cost-effective transport modes.
- Late/Non-Delivery Costs: Penalizes delayed or missed demand fulfillment.
- Fair share mechanisms ensure balanced distribution of supply and safety stock.
- Advanced settings allow runtime optimization, balancing complexity vs. efficiency.
Strategic decisions beyond algorithms
Selecting the right algorithm is just one part of the equation. There are numerous tactical decisions that can give your supply chain a competitive edge. By leveraging the full capabilities of SAP IBP, you can fine-tune your deployment planning to meet your business goals effectively.
When planning deployment strategies, it’s crucial to first outline your business processes and understand the various deployment settings and their impacts. Start simple, test extensively, and use user stories to clarify business requirements.
SAP Integrated Business Planning (IBP) offers a range of settings and tools to streamline deployment processes. The IBP Planner Workspace is a powerful app that receives regular updates to enhance user-friendliness.
It includes features like custom alerts and dashboards, which help planners focus on specific scenarios and view/change consolidated business data at a glance.
In H2 2025, SAP will introduce a new harmonized planning area for IBP, combining mid-long-term supply, demand, and inventory planning with short-mid-term supply planning in one integrated area. This update will bring significant benefits, including better integration and efficiency.
Overall, combining different deployment strategies can be effective, but it’s essential to understand your business needs and processes thoroughly. SAP IBP provides the tools and flexibility to support these strategies, making deployment and transport load building more efficient and integrated.
